Leadership and Management Dynamics - Essay Example

?Running Head: Leadership and Management Leadership and Management [Institute’s Leadership and Management Introduction There isno other topic in the management literature other than leadership, which has been able to spark consistently so much of debate or to which so much of ink has dedicated over the past century or so. It still continues to fascinate many academicians, scholars and experts all still remains the topic of arguments in fields of organisational behaviour, management, human resource management, organisational theory, psychology, sociology and others (Mintzberg, Kotter & Zaleznik, pp. 468-469, 1998). This paper is an attempt to look at the leadership dynamics of a well-known leader Ricardo Semler, who is currently the CEO of Brazilian firm Semco SA. Ricardo Semler and his company are widely known for its principles of industrial and corporate democracy, participative management, innovative business management and corporate re-engineering. Born in 1959 at Sao Paula, Semler is one of biggest names of the corporate, business and academic arena of Brazil and all over the world. Semler has repeatedly been nominated as the top 100 global business leaders. In addition, “he was named as the Latin American Businessmen of the year in 1990 by the TIME magazine” (Antonakis, Cianciolo & Sternberg, pp. 41-49, 2004). Semler has is occasional lecturers to seminars and has received immense media attention. ‘World Economic Forum’ has also nominated Semler as Leaders of Tomorrow. He is the author of many business articles in Harvard Business Review and he has also written best sellers such as “The Seven Day Weekend: Changing the Way it Works” and “Turning Your Own Table” (Hamel & Breen, pp. 258-259, 2007). This paper would explore his business styles, leadership dynamics; compare the information available on him with the well-known leadership literature to draw certain conclusions and recommendations. Organisational Context Antonio Kurt Semler, an Austrian Born immigrant in Sao Paulo, established his little company with the name of “Semler & Company” in 1952 to sell his patented vegetable oil centrifuge (Patching, pp. 86-87, 2007). However, as the company grew, it diversified into the business of Mixer & Agitator and other supply materials for shipping and construction. However, Antonio Semler strongly believed in the autocratic and controlled style of leadership (Antonakis et. al, pp. 41-49, 2004). At that time, Semler was a tall and hierarchal organisation with many layers of management. Ricardo was the only son of the Semler family and therefore, Antonio wanted, right from the started, his son to take over the company after him (Sashkin & Sashkin, pp. 379-386, 2003). However, Semler was not interested in the family business. Despite the fact that he went to Harvard Business School for business studies, his interest was to join a Rock band, like the ones that were famous in the 1970s (Semler, pp. 3-6, 1989). However, on the insistence of his father, he took the position of Assistant to the Board of Directors. Even though, the job title suggests that young Semler had quite some authority over the business, the same was not true. He had disagreements over most of the issues with the other senior board of directors most of which were the “golf buddies” of his father (Tjosvold & Tjosvold, pp. 487-489, 1995). This frustration and disappointment grew so much that young Semler finally threatened his father to leave the company. As mentioned earlier that it was the dream of his father to see his son taking over the company. Therefore, after a few weeks, Antonio Semler took a decision, which surprised everyone. He himself went on a vacation to Europe, resigned from his post, and transferred all the power to his son, leaving Ricardo Semler as the incharge of the company (Semler, pp. 3-6, 1989). After taking over the company, he fired over 75 percent of the top and middle managers of the company and took the company into a new strategic direction of acquisitions and searching for new markets (Young, pp. 161-168, 2006). He worked really very hard and made sure that the people around him are doing the same. However, this worsened the employee relations and brought Semler on the verge of a physical collapse. Surprisingly, he fainted in a factory when he was 25. He was admitted in a hospital and that is when he realised the importance of work-life balance. This event transformed his way of thinking of looking at things. He came up with all of his philosophers and approaches for which he is known today. Semler (2004) writes about this experience, “Semco appeared highly organized and well disciplined, and we still could not get our people to perform as we wanted, or be happy with their jobs. If only I could break the structure apart a bit, I thought to myself, I might see what was alienating so many of our people. I could not help thinking that Semco could be run differently, without counting everything, without regulating everyone, without keeping track of whether people were late, without all those numbers and all those rules. What if we could strip away all the artificial nonsense, all the managerial mumbo jumbo? What if we could run the business in a simpler way, a more natural way?” Since 1980 and 2011, much has happened in Brazil at political and economic scene. The government has shifted from leftists to rightists, from democrats to dictators, from civilian leaders to military generals and the economy has witnessed the recession of 1990s and then the recession of late 2000s (Lloyd, pp. 516-518, 2009). The company itself survived a near bankruptcy experience and has been through all the good and bad times, under the leadership of Semler and his golden principles. Under the Semler’s leadership, Semco’s sales have grown by 24 percent under his leadership, profits have tripled, and the average annual employee turnover is less than 1 percent where the industry average is of more than 20 percent. The company has posted double-digit growth of 27.5 percent for the past 14 years. More than 150 Fortune 500 companies have sent their representatives and researchers to study the company and discover the secret of their remarkable successes over the years (Church, pp. 156, 2010). The model of participative management, which Ricardo Semler initiated, is being studied and taught by many universities all around the world (Sashkin & Sashkin, pp. 379-386, 2003). Findings and Critical Evaluation The leadership ideology of Semler consists of many aspects out of which some have been discussed below. However, in order to have a quick, brief yet a complete overview of his leadership style and ideology, let us refer to Semler himself. Semler (1989) puts forwards his thoughts, “I believe in responsibility but not in pyramidal hierarchy. I think that strategic planning and vision are often barriers to success. I dispute the value of growth. I don’t think a company’s success can be measured in numbers, since the numbers ignore what the end user really thinks of the product and what the people who produce it really think of the company. I question the supremacy of talent, too much of which is as bad as too little. I’m not sure I believe that control is either expedient or desirable. I did try to reconstruct the company so that Semco could govern itself on the basis of three values: employee participation, profit sharing, and open information systems. Participation gives people control of their work, profit sharing gives them a reason to do it better, and information tells them what’s working and what isn’t.” Therefore, Wen asked who is the in charge here? Richard would reply, “no one”. At another occasion, Semler (1994) wrote about his vision and working ideology as “The key to management is to get rid of the managers. The key to getting work done on time is to stop wearing a watch. The best way to invest corporate profits is to give them to the employees. The purpose of work is not to make money. The purpose of work is to make the workers, whether working stiffs or top executives, feel good about life.” There is no formal organisational chart for the company. Even if there were a desperate need for sketching one, the employees would do the same with a pencil and throw away the paper as soon as they are done with it (Goleman, et. al, pp. 49-51, 2001). Employees have the right to go on strikes and there is nothing in the company’s code of conduct, which could allow the managers to stop those workers (Semler, pp. 1-8, 1994). All information regarding the salary of a clerk to the CEO becomes the part of intra-company database. At every board meeting there are two seats reserved for employees that want to join on first come and first serve basis (Hamel & Breen, pp. 258-259, 2007: Semler, pp. 3-6, 1989). Work with Fun Ideology The “work with fun” ideology of Semler has now become a part of part of their overall organisational culture of Semco. It was during the early years when Semler took the control over the organisation. There were many complaints about the food at the cafeteria. Those complaints were never ending. Semler decided to allow employees take control of the food management and the complaints ended. This was the point from where this soft management model took a go in Semco (Tjosvold & Tjosvold, pp. 487-489, 1995). Semler learnt a lesson here, which he applied in all other aspects. He learnt that employee empowerment is the solution to many problems. Thus endless stream of empowering employees begin. Currently, there is no dress code at Semco; employees can come to work wearing anything they want until and unless their fellow colleagues do not dislike it (Semler, pp. 265-269, 2001). At company production plants, hammocks are present all over the place in the gardens and grounds so that people could take afternoon naps. If someone has worked on a Saturday then he is encouraged to spend the Monday on the beach or take a day off (Avery, et. al, pp. 69-72, 2004: Semler, pp. 265-269, 2001). All the “offices” at Semco at the first glance look bright, airy, and tidy, well decorated with great pieces of Brazilian art, however, what is missing there are the “offices”. There are no cubicles, room with soundproof glass ceilings or assistants which one needs to by pass in order to get to the officers (Semler, 1993). Instead, there are round tables with four low divides (one could see the person by standing) and senior executives may be seen sharing their music collection with the fresh recruits or school interns. There are small conference rooms but anyone can come and join in, regardless of their ranks (Semler, pp. 265-269, 2001). During the early years of Semler, he realised that Sao Paulo was a densely populated city of 15 million people and traffic jams was an inevitable realities until the time when air travel becomes accessible to the masses. This meant that the employees were actually giving 2-5 hours on top of their work timings to the company. The solution was clear but it appeared unrealistic to everyone (Semler, pp. 1-8, 1994). Semler decided to introduce flexi timings; however, everyone questioned that how this approach would work for the labours working at the assembly lines of the factories. However, like everything else, it worked in favour of the company. Proper homework and preparation ensured that the formation of core groups, which arrived at the same time to work on the assembly lines. However, the difference this time was the fact that these timings were not a result of imposition but of selection by the employees (Church, pp. 156, 2010). Effect of Semler’s Leadership Style on Compensation Polices One of the biggest impacts of this leadership style of Semler is evident on the compensation policies of the company. Semco has one of the most incredible, exciting, and unorthodox compensation systems in the well-known corporate world. At Semco, employees set their own salaries. However, once or twice a year, surveys determine the competitive price ranges compared to the company and market factors (Banks, pp. 15-16, 2008). Then the employees are asked to what a look on that and decide that where they stand on that list. The information about the salaries of clerks to the CEO becomes a part of intra-company database so that every employee could see it (Antonakis, Cianciolo & Sternberg, pp. 41-49, 2004). Therefore, employees get all the information, which they need to make a fair decision about their pay. If the employee asks for too little, he eventually understands that he is overpaid and then settles at the equilibrium. If he asks for too much, the employee receives the demanded for at least the first year but after a careful analysis of his performance, the company asks him to reconsider. In majority of the cases, these employees also settle at the equilibrium point (Semler, pp. 1-8, 1994). Fiedler’s Contingency Model of Leadership Effectiveness Another way of looking at Semler’s leadership approach could be in light on ‘Fiedler’s Contingency Model of Leadership Effectiveness’ (Patching, pp. 86-87, 2007). This model was a breakthrough success as one of situational factor theories of leadership, when many of trait theories, which were focusing on the assumption that “leaders are born, not made” were falling and receiving heavy criticism (Patching, pp. 86-87, 2007). Fielder believed that the situational favourable would be a product of threes situations which are namely Leader-member relationship, Degree of task structure and Leaders’ Position power. If these dimensions are high then the situation is favourable and vice versa. Important here to note is that when the situation is highly favourable or highly unfavourable an autocratic, task orientated and dictatorship style of management suits the most. However, if the factors are more inclined towards the middle or are away from both the extremes then a participative and human relations approach makes the most sense (Avery, et. al, pp. 69-72, 2004). Now let us look at the example of Ricardo Semler and his leadership style. Quite clearly, the leader member relation ship is high, degree of task structure is low since the employees are empowered to do whatever they want in the absence of proper job descriptions and the leader power position is also somewhat low because Semler does not enjoy a great deal of authority over the decisions that Semco takes (Martin & Fellenz, pp. 77-78, 2010). In fact, for taking major decisions, they are a total of 3000 votes and Semler just enjoys the right of one vote. Nevertheless, he does have the power of “veto” but he neither he has ever used it nor he intends to use it. According to Ricardo, if I will use my veto power once, people would lose their motivation of taking decisions and coming up in front because they would think that the “top guy” would veto it one more time. Therefore, it is better to preserve the veto power for “never” (Semler, pp. 265-269, 2001). Thus, it appears that the situation is somewhere in between of moderately unfavourable and unfavourable. This implies the use of mixed approach of participative and authoritarian approach. However, the approach that Ricardo has adopted is more than that of human relations approach (Rosenbach & Taylor, pp. 246-248, 2006). This raises questions on the validity of Fielder’s approach because clearly it does not seem to be applying in this particular situation. Furthermore, Semler’s approach to leadership has challenged this model altogether. During his early days, when Semler was the target of criticism from labour unions for non-understandable practices, employees for “what the heck are you doing”, media by asking that “What planet are you from?” (Teal, pp. 430-440, 1996) corporate sector by saying that Semler is increasing the bargaining power of employees and making the industry structure unfavourable, his own managers for taking away the traditional benefits, perks and job titles, from his senior and middle managers for firing them and others; even in those days Semler was the following the same leadership approach and its came out as more than a success (Avery, et. al, pp. 69-72, 2004). In those early days, all three factors were not in favour of Semler, yet he pulled it off with his own ways. Therefore, it indicates that situations and traits are not important factors in defining the “best fit” leadership style. It depends on the vision and will of the leader, his perseverance, his persistence and motivation which determine his effectiveness and success or failures (Rosenbach & Taylor, pp. 246-248, 2006). Path Goal Theory of Leadership Path goal theory of leadership is another way to look at the Semler’s leadership style. According to the Path goal theory, there are essentially four types of leadership styles, which are directive leadership, supportive leadership, participative leadership and achievement orientated. Semler’s style fulfils all the latter three leadership style (Marquardt & Berger, pp. 91-93, 2000). He is a supportive leader because he has faith in his people has a genuine concern about their work life balance. Semler is a participative leader because he has created systems, which have nurtured the principles of participative management and corporate democracy at Semco in a way that no such example can be found which could beat Semco’s commitment to these principles. Semler stands true on the achievement-orientated leadership style because he sets challenging goals for his employees but has all the faith in their abilities. Transformational Leadership A careful analysis of Semler’s leadership styles and history suggests that his style suggests that Semler is more of transformational leader rather than transactional leader (Marquardt & Berger, pp. 91-93, 2000). According to a research conducted by Hamel & Breen (2007, pp. 258-259) with more than 150 leaders from different companies suggested that all transformational leaders share seven characteristics. “First, they identify themselves as change agents. Second, they are courageous. Third, they believe in people. Fourth, they are value driven. Fifth, they are life-long learners. Sixth, they have the ability to deal with complexity, ambiguity, and uncertainty, and seventh, they are visionaries” (Hamel & Breen, pp. 258-259, 2007). Without any doubts, Semler fulfils all of these criteria to a great extent. He took over the company when it was about to sink, he had a vision about the company with which he changed it completely. During this process, he took everybody onboard and convinced that this change is the need of time. His lives his work life and personal life with certain principles and values which he preaches as well (Goleman, et. al, pp. 49-51, 2001). He has the power, courage and boldness to take on tough situations when other would pass (Avery, et. al, pp. 69-72, 2004). Ingroup and Outgroup Another way of understanding the unusual successes of Semler’s leadership approaches is possible in light of concepts of “Ingroup” and “Outgroup”. Every leader finds himself in a crowd of in-groups and out-groups (Avolio, pp. 114-119, 1999). Ingroup refers to the group of people with which the leader is better able to associate him. These people share certain characteristics of colour, cast, creed, religion, ethnicity, nationalities, sexual orientations or demographics, or they may share certain traits, skills, interests or other which bring them closer with the leader. The leader usually spends an unusual amount of time with these people thus favouring them and ends providing with certain benefits, perks and privileges, which are not available for other employees thus creating a feeling of exclusion, biasness and segregation (Kouzes & Posner, pp. 149-152, 2007). Quite understandably, this puts a serious dent on job satisfaction and motivation of employees from the Outgroup. However, in Semler’s case, there is only group of people and that is of ingroup. Each and every employee of the company is the part of this ingroup. The available literature of Semler suggests that there no specific people who are close to Semler but every employee working for him believes that they are close to Semler due to his participative management policies. Virtually any employees can walk into Semler’s room anytime he or she wants. Therefore, the high motivation which is usually limited to a certain number of people under ordinary conditions, in this case, is spread over all the employees thus allowing Semco to take the benefit of the same (Daft, pp. 219-223, 2009). Conclusions Therefore, towards the end, following conclusions can be derived from the paper and the above presented analysis. Leaders are not born but they are made. The core of leadership is not any traits or situations but a strong and inspiring vision. If a person can see beyond what people around him are seeing then he can be a leader. If a person has the ability to inspire people then he can be leader. If a person has the skills and courage to champion change, lead change and manage the change management process, then he definitely can be a leader (Goleman, et. al, pp. 49-51, 2001). Ricardo has disproved the myth that concern of production and concern of employees are two mutually exclusive and leaders will have to select one. In fact, these options can not be any closer. Concern of employees will automatically bring about huge gains in terms or production and productivity (Goleman, et. al, pp. 189-190, 2001). At least in the long run, Theory Y managers are better than Theory X managers. Recommendations Despite the fact during his tenure, Ricardo has empowered and inspired many employees, it is important now to find the second line of leadership for the company, someone can took over the post of Semler. 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